Dollar Rallies, Stocks Erase Losses After Fed Move: Markets Wrap

(Bloomberg) -- The dollar rallied and Treasuries pared gains as Federal Reserve policy makers cast doubt on the need for further easing after lowering their main interest rate for a second time this year. Stocks erased losses as financial companies that benefit from higher rates rallied.

The S&P 500 Index ended little changed, wiping out a drop that at one point reached the biggest in four weeks, as Fed Chair Jerome Powell promised at a press conference to be vigilant against any signs of economic slowdown. Banks were the best performers. Ten-year Treasury yields dipped just below 1.8%.

While Fed policy makers were widely expected to reduce their benchmark rate by a quarter-point, investors were more focused on the outlook for further cuts this year. Five officials think the rate at year end should be higher than it is after today’s cut, five wanted the rate cut today but are not projecting any more cuts, and seven are projecting one more quarter-point cut by December.

“I view the guidance we received as mixed,” said Eric Winograd, senior U.S. economist at AllianceBernstein. “They want to stop the economy from slipping into a recession but aren’t going to do anything to push growth higher.”

Elsewhere, FedEx Corp. tumbled after the company slashed its profit outlook, blaming a global economy weakened by trade tensions. Stocks were mixed in Asia. Europe’s equity benchmark barley budged. Precious metals fell.

Oil ticked lower after tumbling Tuesday, when Saudi Aramco said it had revived 41% of capacity at a key crude-processing complex days after a devastating aerial attack that wrecked vital equipment and rocked global energy markets.

These are some key events to keep an eye on this week:

• The Bank of Japan monetary policy decision is Thursday, followed by a briefing from Governor Haruhiko Kuroda.
• Bank Indonesia and Bank of England also decide policy Thursday.
• Australia jobs figures are out Thursday.
• Friday is quadruple witching day for U.S. markets. When the quarterly expiration of futures and options on indexes and stocks occurs on the same day, surging volatility and trading can follow.

Here are the main moves in markets:

Stocks

• The S&P 500 Index was little changed at the close of trading in New York.
• The Stoxx Europe 600 Index was little changed.
• The MSCI Emerging Market Index advanced 0.2%.
• The Nikkei-225 Stock Average fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index increased 0.2%.
• The British pound fell 0.1% to $1.2493.
• The euro declined 0.3% to $1.1035.
• The Japanese yen fell 0.3% to 108.4 per dollar.

Bonds

• The yield on 10-year Treasuries fell one basis point to 1.79%.
• Germany’s 10-year yield fell four basis points to -0.51%.
• Japan’s 10-year yield slipped three basis points to -0.20%

Commodities

• West Texas Intermediate crude fell 2.1% to $58.11 a barrel.
• The Bloomberg Commodity Index decreased 0.5%.
• Gold fell 0.4% to $1,495.14 an ounce.

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